95-074

Response October 17, 1995

Request

October 4, 1995

Mr. Val Oveson, Tax Commissioner

Utah State Tax Commission

210 North 1950 West

Salt Lake City, Utah 84134

Re: XXXXX

Dear Mr. Oveson:

The purpose of this letter is to propose a new agreement that will replace the above-referenced agreement (copy enclosed) which was entered into by XXXXX and the Utah State Tax Commission. The agreement of July 16, 1990 was entered into under the presumption that XXXXX independent sales agents resell XXXXX products which they purchase and of which they take receipt. Under this scenario, XXXXX charges independent sales agents "wholesale" price for product purchases and assesses sales tax based upon the suggested retail price (SRP).

Review of personal consumption over the past twelve months reflects the majority of products purchased by independent sales agents are consumed personally by the independent sales agent. The analysis indicates independent sales agents personally consume the majority of their individual product purchases. This high personal use of product by independent sales agents justifies consideration of an alternative agreement which more accurately reflects the facts and circumstances.

Attached is the proposed "draft" agreement to replace the above-referenced agreement. If you have any questions after reviewing the proposed agreement, please contact me and I would be pleased to discuss them with you.

Very truly yours,

XXXXX

October 17, 1995

XXXXX

RE: Draft agreement to collect sales tax on behalf of independent contractors

Dear XXXXX,

We have received your proposed agreement which allows you to collect sales tax for independent sales agents. We decline to enter the agreement because it uses the retailers cost of product as the basis for calculating taxes. We assume that the retailers resell your products above cost, and sales tax must be collected on that amount.

If a sales agent purchases products for his or her own use, for advertising, or to give away as a gift or incentive, it is appropriate to calculate the sales tax on the sales agent's cost of the product. However, we decline to assume that all or most of the agent's purchases are for personal use.

The Commission has entered contracts which allow companies like yours to collect sales tax on the suggested retail price of the products. We are currently reviewing that practice. In the meantime, we will continue to operate under our current agreement with your company.

For the Commission,

Alice Shearer

Commissioner